ERCOT: An Island Unto Itself

Posted on April 24, 2012

ERCOT is an island unto itself, with limited ties to other transmission systems. Should that change?

The Electric Reliability Council of Texas, the quasi-governmental organization that operates the state’s power grid, maintains limited connections to other states. This arrangement keeps ERCOT free from much of the federal oversight that generally accompanies interstate trade. This can be a good thing. But ERCOT’s limited connections also restrict its ability to import power during a crisis.

Last February, for instance, Texas could have used more electricity after several plants went down during a cold snap. ERCOT’s few links to out-of-state grids (including three links to Mexico) couldn’t bring in enough power to make up for the sudden loss. As a result ERCOT ordered rolling blackouts.

The question of whether ERCOT should create more links to the outside is getting asked more frequently these days out of concern over the state’s energy future. It has been argued that the fed’s limited jurisdiction over ERCOT has allowed for more nimble policymaking in Texas. But the state also faces the prospect of a future power shortages, and there are some suggestions to address this problem by encouraging electricity prices to go up.

That’s why Geoffrey Gay, general counsel for the Texas Coalition for Affordable Power, says it may be time to consider creating more links to the outside. “All I’m suggesting is, it’s time to start talking to federal regulators about how we can participate in a national grid,” said Gay, speaking to a reporter for National Public Radio.

The Texas Tribune’s Kate Galbraith writes about two major projects that could connect ERCOT to other grids.

He said he would prefer for Texas to keep its regulatory oversight over ERCOT, but added that it’s also important to supplement the state’s generation reserves. “It used to be that we wanted to preserve our autonomy and to protect our cheap power and to recognize the fact that we had adequate reserve margin. Today that is changed. And we don’t have the cheapest power in the country, and we have a dwindling reserve margin.”

Energy reporter Kate Galbraith also touches upon the issue in a recent article for the Texas Tribune, an online publication. She highlights two proposals in particular — both massive, ambitious and probably years from completion. One, a $2 billion facility in New Mexico called Tres Amigas, would connect ERCOT with North America’s two other major power grids. The other, a similarly priced project called Southern Cross, would add a link to Mississippi, and ultimately to the Tennessee Valley Authority.

Sen. Van de Putte: How will new links help Texas?

Galbraith notes that some key players in Texas may support those transmission links — but only as long as the Federal Energy Regulatory Commission offers assurances that they won’t trigger more federal oversight. “There’s no way we would support any of those if we didn’t have commitments from FERC that it didn’t threaten our jurisdiction,” Public Utility Commission chairwoman Donna Nelson told Galbraith.

Connecting ERCOT to the outside also has raised questions from key lawmakers. In a recent letter to the PUC, for instance, state Sen. Leticia Van de Putte has requested information about the potential economic benefit of the Tres Amigas and Southern Cross projects, their sources of financing, and when they might result in additional power for Texas. She requested the information in her role as a member of the Senate’s Business and Commerce Committee, which has responsibility for Texas energy policy.

“Texas is distinct in being the only state in the nation with an independent electricity grid. Having such independence brings many advantages and I am interested in learning more about connections to other grids,” she wrote.

You can read more about the ERCOT grid, and its relationship to other grids, in The Story of ERCOT, which was released last year by the Texas Coalition for Affordable Power.

TCAP is a coalition of more than 160 cities and other political subdivisions that purchase electricity in the deregulated market for their own governmental use. Because high energy costs can impact municipal budgets and the ability to fund essential services, TCAP, as part of its mission, actively promotes affordable energy policies. High energy prices also place a burden on local businesses and home consumers.